ValuratorExplore Company Valuations

Price-to-Free Cash Flow (P/FCF)

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Estimated Fair Value

$239.88

Stock price: $333.69

Fair value below stock price

This model estimates a company's fair value by applying its historical P/FCF multiple to Free Cash Flow.

Historical Annual P/FCF Multiples

This chart shows the company's historical P/FCF multiple by year.

2016: 10.73x P/FCF10.73x20162017: 15.77x P/FCF15.77x20172018: 11.27x P/FCF11.27x20182019: 21.69x P/FCF21.69x20192020: 30.03x P/FCF30.03x20202021: 30.85x P/FCF30.85x20212022: 18.41x P/FCF18.41x20222023: 29.86x P/FCF29.86x20232024: 34.74x P/FCF34.74x20242025: 40.74x P/FCF40.74x2025

Key Valuation Metrics

Selected P/FCF Multiple

Notes

• The current P/FCF multiple is meaningfully above the historical median, suggesting the stock may be overvalued relative to its historical P/FCF valuation.
• The historical P/FCF range is wide, meaning the valuation is sensitive to which historical multiple is used.

What is Price-to-Free Cash Flow (P/FCF) Valuation?

Price-to-Free Cash Flow (P/FCF) Valuation estimates a company's Fair Value based on its Free Cash Flow and the P/FCF multiple applied to that cash flow.

The P/FCF ratio compares a company's equity value with its Free Cash Flow. It shows how much investors are paying for the cash generated by the business after capital expenditures.

Historical P/FCF multiples show the valuation levels at which the company's equity has traded in the past. They can be used as a reference for estimating Fair Equity Value from Free Cash Flow.

P/FCF Valuation is most useful for companies with positive and relatively stable Free Cash Flow, but it may be less reliable when cash generation is highly volatile or changes materially over time.

How the P/FCF Model Works

The P/FCF model estimates fair value by calculating the company's historical P/FCF multiples, selecting a valuation multiple, applying it to Free Cash Flow, and converting the resulting Fair Equity Value into a Fair Value per Share.

Calculate Historical P/FCF
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Select the P/FCF Multiple
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Estimate Fair Value Per Share
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Compare With Current Valuation

P/FCF Formula

P/FCF=Market CapitalizationFree Cash Flow \text{P/FCF} = \frac{ \text{Market Capitalization} }{ \text{Free Cash Flow} }
Free Cash Flow=Operating Cash Flow−Capital Expenditure \text{Free Cash Flow} = \text{Operating Cash Flow} - \text{Capital Expenditure}

Key Model Assumptions

• The company must have positive Free Cash Flow.
• Free Cash Flow is based on trailing twelve-month (TTM) results when four consecutive quarterly periods are available; otherwise, the latest annual Free Cash Flow is used.
• Historical P/FCF multiples require positive Free Cash Flow and valid share price and shares outstanding data.
• The 10 most recent valid historical P/FCF multiples are used to estimate the company's typical valuation multiple.
• The historical median P/FCF forms the Base valuation assumption.
• Conservative and optimistic scenarios adjust the historical median P/FCF.
• Historical P/FCF multiples may not remain representative if the company's cash generation or business performance changes materially.

Step 1 — Calculate Historical P/FCF Multiples

Historical Market Capitalization = Historical Price × Historical Shares Outstanding

Historical P/FCF = Historical Market Capitalization / Historical Free Cash Flow
Historical Median P/FCF = Median of the 10 most recent valid historical P/FCF multiples
Historical Median P/FCF = 25.78x

The model calculates historical market capitalization by multiplying the historical share price by shares outstanding. It then divides historical market capitalization by historical Free Cash Flow. The most recent valid P/FCF multiples are used to determine the company's typical historical valuation multiple. For Apple, the historical median P/FCF is 25.78x.

Step 2 — Select the Valuation Multiple

Selected P/FCF = Historical Median P/FCF × Scenario Adjustment (Base)
Selected P/FCF = 25.78x × 100% = 25.78x

The selected scenario adjusts the historical median P/FCF multiple to reflect a more conservative or optimistic valuation assumption. Under the base scenario, the model uses a P/FCF multiple of 25.78x.

Step 3 — Estimate Fair Value per Share

Fair Equity Value = Free Cash Flow × Selected P/FCF
Fair Equity Value = $136.7B × 25.78x = $3523.2B
Fair Value per Share = Fair Equity Value / Shares Outstanding
Fair Value per Share = $3523.2B / 14.69B = $239.88

The selected P/FCF multiple is applied to Apple's current Free Cash Flow to estimate Fair Equity Value. The resulting equity value is divided by Shares Outstanding to estimate a Fair Value per Share of $239.88.

Step 4 — Compare With the Current Market Valuation

Current P/FCF = Current Market Capitalization / Free Cash Flow
Current P/FCF = $4901.0B / $136.7B = 35.86x
Valuation Gap = Fair Value per Share / Current Price − 1
Valuation Gap = $239.88 / $333.69 − 1 = -28.1%

Current P/FCF shows the multiple currently assigned to Apple's Free Cash Flow. The company currently trades at 35.86x compared with a historical median of 25.78x.

The Valuation Gap compares the estimated Fair Value with the current stock price of $333.69. Under the current assumptions, the Valuation Gap is -28.1%.